Government Contract Cost Accounting

While anyone can read these rules, we help you understand why they exist, how to interpret them and how the government enforces them. Having access to this deeper level of understanding helps our clients reduce risk, improve compliance effectiveness, and improve accounting simplicity. Effective cost accounting doesn’t necessarily require tedious complexity.

The government’s cost accounting rules govern what costs the government will or won’t pay (i.e., cost allowability), and how much of those costs they’re willing to pay (i.e., cost allocability). Political and socio-economic policy frequently underpin the cost allowability rules. This means “unallowable” costs represent items or activities that the government, as a steward of public funds, won’t pay regardless of whether or not the item is a routine business expense. While the government will pay for allowable costs, it will only pay its “fair share” as determined by its cost allocability rules.

Both of these concepts are important when either negotiating noncompetitive contract prices (or price modifications) or performing cost-reimbursable contracts. Explore the sections below to learn more about how we help clients distill the rules and keep it simple:

• Cost allowability
• Cost allocability
• Incurred cost proposals (i.e., Annual Final Indirect Cost Rate Proposals)
• Indirect cost structures